The Long Term Investor

Why in the world...would I NOT own the top companies in the world?

JPMorgan’s Kelly Says Only a Bear-Market ‘Shock’ Can Upend Tech

https://finance.yahoo.com/news/jpmorgan-kelly-says-only-bear-113144731.html

(BOLD is my opinion OR what I consider important content)

"(Bloomberg) -- The outsized sway of technology giants over US stocks is likely to persist, absent a major market rout along the lines of what investors endured in 2022, says JPMorgan Asset Management’s David Kelly.

The firm’s chief global market strategist is among Wall Street pros who expect earnings growth in the S&P 500 Index will broaden beyond the tech behemoths by year-end. But in his view, it likely won’t be enough to close the wide performance gap between those megacap shares and the rest of the US equity benchmark.

That means an extreme blow to market sentiment would be needed to derail the flow of cash into the soaring Big Tech names that have led the market’s advance in 2024, said Kelly, whose firm manages about $3 trillion. Two years ago, for example, tech shares were crushed by the Federal Reserve’s aggressive tightening, and slumped more than the broader market.

“When you have the next bear market, then I think the highest-flying equities are the ones that are going to be most beaten up as indeed they were in 2022,” Kelly said in an interview. “You have to have a shock to market sentiment in order to disrupt the pattern we’re seeing in terms of how people are deploying their money.”

Big technology companies have been sitting atop the stock market for years, but their grip has never been as tight as it is now. A version of the S&P 500 that makes little distinction between Microsoft Corp. and Macy’s Inc. has trailed its cap-weighted peer by 10 percentage points this year, a record January-June underperformance, data compiled by Bloomberg show.

Profit growth for the Big Tech stocks is largely expected to slow, while the remaining S&P 500 companies are poised to see earnings accelerate, in the view of many forecasters. Strategists at firms including Morgan Stanley and Bank of America Corp. have said that shift will help lift the rest of the stock market.

Kelly anticipates that the narrowing earnings gap won’t be enough to dim the fervor around artificial intelligence any time soon. To be sure, for investors with a longer horizon, he does recommend seeking opportunities outside of Big Tech, given how stretched those stocks’ valuations have gotten.

Take the S&P 500 Information Technology Index, which in June traded at 31 times expected profits in the next 12 months, compared with a multiple of 21 for the entire S&P 500. That 10-point gap is the widest since 2003, data compiled by Bloomberg show.

“What I think is driving the market is this momentum psychology,” he said. “When you have a particular theme, just a few of those names in the theme seem to attract cash — and a slow change in the distribution of earnings is not really going to be noticed by markets or in investor psychology.”

There are few signs, for now, of that momentum abating. Investors largely expect a soft landing, with solid economic data, the Fed on track to reduce rates and inflation easing.

It’s a “boring” backdrop, Kelly said, adding that “boring is very good for markets.”"

MY COMMENT

YES......boring is good for the markets......and....normal.

In addition I say......these big cap tech monster companies are going to be the MOST DOMINANT companies in the world for a long, long, time. I am talking about the BIG NAMES....AAPL, MSFT, GOOGL, NVDA, AMZN, and NVDA.

I dont care....bear market....bull market....I want to own the best of the best in the stock markets and in the business world worldwide.

 

As to the general markets and the big cap tech stocks in particular.

I would not be surprised if we see a little market pull back and weakness in the month of July......as we head to earnings late in July and into August.

My feel for the markets right now....short term.....we are not seeing much excitement and it is a TIRED market that we are seeing. We have seen HUGE gains in the first half of the year and a little summer dip is perfectly acceptable......perhaps even past due.

If this happens it is perfectly NORMAL.

 

HEY ZUKODANY

Good old PLTR has been on a tear lately. UP by 22.7% over the past month. UP by 6.82% over five days. UP by 57% over the past six months.

Thanks for the tip. It is not a huge part of my portfolio.....BUT....I am happy to own it and will continue to add shares here and there if it continues to look good.

When I get the next chunk of money to invest for my sibling over the next few weeks.....I will add at least $10,000 to PLTR in the account.

 

I cant believe that I ended in the GREEN today....but I did by a small amount. When I looked about 15 minutes before the close NVDA was down over $2. It came back nicely in the last fifteen minutes......enough to pull me into the GREEN for my nine stocks....even though it was still down by $1.63 at the close.

I also lost out to the SP500 today by 0.56%.

All in all I am extremely happy to end the day in the GREEN. We move on to the short day tomorrow when the markets close at 1:00PM.

 

The markets today.....KILLER.

S&P 500 Closes Above 5,500 in Record-Breaking Run: Markets Wrap

https://finance.yahoo.com/news/asian-stocks-slip-treasuries-hit-223416541.html

(BOLD is my opinion OR what I consider important content)

"(Bloomberg) -- Wall Street traders sent stocks to all-time highs as bond yields fell, with traders looking at prospects for Federal Reserve rate cuts after Jerome Powell cited signals the US is back on a disinflationary path.

For the first time in its history, the S&P 500 closed above 5,500 to extend a blistering 2024 rally that has left analysts scrambling to update their targets. It was the gauge’s 32nd record this year. Tesla Inc. surged 10% to lead gains in megacaps, though Nvidia Corp. failed to gain traction. The Nasdaq 100 hit the 20,000 mark, also notching a record high.

Equities have defied doomsayers amid solid corporate earnings, the artificial-intelligence mania and expectations that interest rates will decline in 2024. The lack of any meaningful pullback has given bulls conviction that the rally is sustainable.

The S&P 500 will rally to new peaks by the end of the year as economic strength outweighs market risks, according to Lori Calvasina at RBC Capital Markets. She raised her year-end target to 5,700 from 5,300 — among the highest on Wall Street — despite the fact that the market has “gotten a bit ahead of itself.”

“Our suspicion is that 2024’s economy will end up being strong enough to justify a strong move in the S&P 500 for the year as a whole,” Calvasina said.

The record-setting surge in US equities, driven chiefly by American technology behemoths, is once again igniting comparisons to prior boom-and bust cycles on Wall Street. But parallels to the dot-com era and stock-market frenzies of the past are so far exaggerated, if history is any guide.

While the S&P 500 has posted an 85% advance since 2019, even despite some drawdowns over the period, major bull runs of the 20th century dwarf that return. The US stock benchmark soared 220% in the last five years of the Internet bubble at the turn of the century, according to Bloomberg Intelligence data, and 238% in the same-period stretch of the Roaring Twenties.

Deutsche Bank AG strategists expect US earnings to rise by an above-average 13% for the second quarter, driven by megacap growth and tech stocks. The outlook is for a sixth straight quarter of above average beats.

However, the team led by Binky Chadha expects market reaction to be subdued as stocks have rallied in the run-up to the season.

Data Tuesday showed job openings unexpectedly rose, interrupting a trend that underscored a slowdown in labor seen as key for Fed easing. Powell said there’s been a “substantial” move toward better balance between the supply of and demand for workers. He described the job market as strong, but said it is cooling off appropriately so.

To Krishna Guha at Evercore, Powell’s comments were notably upbeat on inflation progress — while also incrementally careful on the balance of risks and employment.

“There was no explicit signal on cuts, but these were assessments that would plausibly support a cut in September,” Guha said.

Wall Street is now gearing up for a slew of economic data that will hit the tape on Wednesday — when the market closes early ahead of Thursday’s holiday. That’s ahead of the all-important US payrolls reading due Friday. Economists expect the report to show employers added about 195,000 payrolls in June and the unemployment rate held at 4%.

To Jose Torres at Interactive Brokers, the next three months of inflation reports will be crucial for both investor sentiment and policymakers’ timing for turning dovish.

“June will likely show continued disinflation, but the potential results for July and August are less clear, raising the question of how many months of favorable data are needed before the Fed moves,” he noted."

MY COMMENT

A KILLER stealth rally going on in the SP500 over the past few weeks. My prediction at the start of the year for....SP500 at 5800.....at year end.....is now looking like a shoe-in.

Of course I just screwed the markets by saying that out loud.

 

Another day in the markets.....another mild and listless open for the markets. Same open we have seen for the past couple of weeks. At least all the averages are slightly in the GREEN at the moment.

I like this little article.

Why “Higher for Longer” Rates Haven’t Stopped Stocks
Reality has proven rates at present levels aren’t toxic for stocks.

https://www.fisherinvestments.com/e...higher-for-longer-rates-havent-stopped-stocks

(BOLD is my opinion OR what I consider important content)

"“Higher for longer” interest rates were supposed to be stocks’ albatross. But since October 2022, rates (short and long) have climbed with stocks. In our view, this illustrates fear over rates killing stocks is again overblown.

The widespread belief that high rates are kryptonite for stocks stems from a textbook way to value securities: using current interest rates to discount future cash flows. The higher the rate, the lower those cash flows’ present value—at least in theory. Hence, rising rates supposedly hurt growth stocks like Tech more because, theoretically, much of their earnings are further in the future. When interest rates rise, the present value of those distant profits shrinks faster—or so the thinking goes.

Problem is, this doesn’t regularly work in practice. Not for stocks generally nor Tech specifically. Exhibits 1 and 2 show the S&P 500 versus 3-month and 10-year Treasury yields, split for easier visualization into the generally rising rate period through the early 1980s and after. There are plenty of times besides the current cycle when stocks rose alongside rates—like in every bull market from 1954 to 1983.

Exhibit 1: Rates Don’t Dictate Stocks’ Direction (1954 – 1983)




Source: FactSet, as of 7/1/2024. S&P 500 price index and 3-month and 10-year Treasury yields, 1/4/1954 – 12/31/1983.

Or, for example, see rising rates during 2015 – 2019 and 2004 – 2006—they didn’t forestall bull markets in Exhibit 2. Now, 2009 – 2019’s long bull market—and 2020 – 2021’s brief one—featured low rates overall, but they didn’t cause stocks’ liftoff. And the wiggles and waggles higher in those stretches don’t regularly coincide with market weakness. Regardless, pre-2008, before the low-rate era began, few would have batted an eye over stocks and rates moving upwards together.

Exhibit 2: Rates Don’t Dictate Stocks’ Direction (1984 – 2024)




Source: FactSet, as of 7/1/2024. S&P 500 price index and 3-month and 10-year Treasury yields, 1/3/1984 – 7/1/2024.

As for higher rates being anathema to growth stocks, Exhibit 3 shows S&P 500 Tech sector relative returns against the fed-funds target rate. Again in previous cycles, purportedly “tighter” monetary policy didn’t stop Tech outperforming in 2015 – 2019 and 1994 – 1995. “Looser” policy in the early 2000s did nothing to stop Tech’s deflation. The mid-2000s’ rate hikes may seem to have stymied Tech, but this is mostly the aftermath of the Tech bubble—investors fought the last war throughout that value-led bull market. Regardless, there is no consistency: Rising rates weren’t auto bearish for Tech, nor were falling rates bullish.

Exhibit 3: Or Growth Stocks’—Like Tech’s—Relative Returns




Source: FactSet, as of 7/1/2024. S&P 500 Information Technology and S&P 500 total returns and fed-funds target rate, 12/31/1989 – 7/1/2024.

That isn’t to say rates have no effect on stocks. In our view, aggressive Fed rate hikes contributed to 2022’s bear market—alongside soaring inflation, Russia’s Ukraine invasion, sanctions and energy price spikes, all amid global supply chain chaos. Those hikes started with surprise, as officials talked up “transitory” price increases and rates staying low beforehand. We think the combination weighed on sentiment, helping drive 2022’s mild bear market. Then fears went too far, setting up positive surprise.

Rising rates can also disproportionately affect sectors reliant on them, like Real Estate, which is down -3.4% year-to-date, the only sector with negative returns. But for Tech? Generally cash-rich balance sheets in the sector make it more immune to rates, not less. And, increasingly, large Tech is quite profitable in the here and now—not just the far future.

This brings us to the main reason why high and/or rising rates aren’t anything to fear. Stocks don’t move on them, but on surprise. In late 2022 and early 2023, markets had pre-priced widespread fear of rising rates’ impacts (along with a bevy of other worries). Many went so far as to expect a 1970s redux. The fear went too far, irrationally depressing expectations—and making positive surprise easier to attain. Rates never soared into the mid-teens like then, sitting instead at historically normal levels—which isn’t terrible. Nothing here looks all that unusual when you take a broader look.

Exhibit 4: Rates Around Their Historical Average




Source: FactSet, as of 7/1/2024. 3-month and 10-year Treasury yields, 1/4/1954 – 7/1/2024.

Moreover, to say what may seem profane presently: There are some benefits from higher rates. One, savers are being rewarded more from interest income to the extent banks pass this through. Your emergency cash isn’t paying zero, which should discourage folks from seeking creative solutions to zero interest.

Now, some also suggest high rates on cash and bonds are so attractive they will lure people out of stocks. But they aren’t in competition. For long-term investors, stocks trounce cash (and bond) returns—and are far better at staying ahead of inflation. The reality, in our view, is this simply means cash reserves aren’t return-free. Regaining some purchasing power after inflation’s spike is fine, but for many, that probably isn’t enough to reach their long-term financial objectives.

Two, the higher bar for borrowers helps weed out speculative endeavors less likely to turn a profit down the line. To the degree this directs capital to more profitable projects, it lowers the likelihood of excesses building in the economy, extending expansion. Without excesses, there isn’t much reason for recession—its main purpose is to wring them out.

Lastly, another ancillary benefit from higher rates: It likely cuts down on central bank experimentation. The low-rate era had many monetary policy institutions around the world get, shall we say, creative. From quantitative easing and negative interest rates to YCC and TLTROs, never mind haphazard one-off reactions with disastrous consequences. The results are questionable at best and, we have found, usually counterproductive. And at their worst: panic-inducing and severely disruptive, turning major financial problems (to be sure) into full-fledged crisis while deepening and prolonging recession—unnecessarily.

When central banks are routinely undertaking large-scale extraordinary measures and unconventional policies because they find their typical toolkits lacking, the void of certainty that can leave may itself be destabilizing. Higher rates don’t guarantee a return to normal monetary policy operations—and less confusion—but we think they do make it more likely. And, in our view, boring central banking is better.

Overall, for investors, we see the same rate fears recycled ad nauseum for two years lingering today. But reality continues proving better than expected—which is why stocks keep plowing ahead."

MY COMMENT

Any large well managed business will find ways to operate with impunity toward interest rates......low or high. The big cap tech companies have mountains of cash. They are certainly immune to rates if they choose to ignore them. If they wish....they can self fund anything they want to do.

High rates can and do impact small business....but....small business is not the stock market. Few small businesses are included in the markets.

The constant old platitudes that you hear being spouted by the media and others about the impact of higher rates....especially on the largest companies.....is simply not true.

BOTTOM line....the markets are NOT the economy.

 

These little....short term....stories go together and both are good news for investors.

US filings for jobless claims inch up modestly, but continuing claims rise for ninth straight week

https://finance.yahoo.com/news/us-filings-jobless-claims-inch-124019788.html

US private payrolls growth slows in June

https://finance.yahoo.com/news/us-private-payrolls-growth-slows-122400554.html

Treasury 10-Year Yield Falls After Soft Jobs Data

https://finance.yahoo.com/news/asia-stocks-rise-p-500-221910701.html

 

After days of small gains and listless action the markets finally POPPED today. NVDA was up by 4.57%. Accordingly since I own a lot of it....my account was strongly in the green for my nine stocks. I had only two stocks in the RED today.....HD and AMZN. I also beat the SP500 today by 1.44%.

A very nice end to a very short market day.

 

The BIG close today.

S&P 500, Nasdaq hit fresh highs as stocks head into holiday with a bang

https://finance.yahoo.com/news/stoc...-head-into-holiday-with-a-bang-170158459.html

(BOLD is my opinion OR what I consider important content)

"Stocks ended Wednesday's holiday-shortened session on a high note with both the S&P 500 and Nasdaq notching fresh records following weak economic data that fueled investor optimism for a September rate cut.

The S&P 500 (^GSPC) rose about 0.5% to hit a new high of 5,537 after the benchmark ended Tuesday above 5,500 for the first time. The tech-heavy Nasdaq Composite (^IXIC) also moved higher, finishing the day up around 0.9%, while the Dow Jones Industrial Average (^DJI) dropped roughly 0.1%.

The moves come ahead of the stock market's shutdown on Thursday to mark the Independence Day holiday.

Weak economic data released Wednesday cemented hopes for an interest-rate cut after the US services sector contracted in June at the fastest pace in four years.

Meanwhile, private-sector job creation slowed for a third straight month with the US adding just 150,000 new jobs in June, below the 165,000 Wall Street had expected. Pay gains for both job stayers and job changers also slowed.

Traders are now pricing in 74% odds of a move lower in September, according to CME's FedWatch tool. Yields also dropped on the results with the 10-year (^TNX) Treasury yield falling roughly 8 basis points to trade near 4.35%.

In other employment news, jobless claims inched up but remained at historic lows. According to the Labor Department, jobless claims for the week ending June 29 rose by 4,000 to 238,000. The data comes just ahead of the key June jobs report release on Friday."

MY COMMENT

Looks like LORI made the right move by holding on to all of her stocks. The PROBABILITY is that the stocks will beat her 3% transfer fee. Today starts her off on the right foot.

We are now in the middle of an EPIC year. If this can continue it will be BIG GAINS for the SP500, the NASDAQ and many investors in big tech this year.

 

HAPPY FORTH OF JULY.....TO ALL THE AMERICANS ON HERE.

Look Past the Debate
Falling uncertainty is a powerful election year tailwind.

https://www.fisherinvestments.com/en-us/insights/market-commentary/look-past-the-debate

(BOLD is my opinion OR what I consider important content)

"Editors’ Note: MarketMinder prefers no political party nor any candidate. We assess developments for their potential economic and market impact only.

The first presidential debate is in the books, and we aren’t going to pile on. Not on either side. And there is a simple reason for this, beyond our steadfast political neutrality: Stocks don’t pick sides. They are party blind, and regardless of who wins, the tailwind of falling political uncertainty seems to be gathering.

We know ours is a rare take. With all the buzzing over potential backroom handwringing and perhaps even a candidate swap, things look chaotic. Uncertain. But that is the point. Election years always start with uncertainty, which can weigh on sentiment. But it melts away as the nominees become clear and the general election race comes into focus. Eventually we get a winner, and as markets price this in, sentiment usually rallies around the victor regardless of party. Markets just like having the clarity that comes with knowing the outcome.

It is tempting to cast the debate and its potential implications as a wildcard. Yet all elections bring wildcards big or small. Plenty of bull market election years have had the proverbial “October surprise.” Early frontrunners have fallen. Third-party candidates have muddied the waters. Talk of a contested convention isn’t new, either.

So in full context, we are hard-pressed to see that much truly changed Thursday. After all, dissatisfaction with these candidates and discussion of President Biden’s age has been running all year. And, for all the talk of a change, taking the baton this late in the race is a tall order. Then, too, Biden’s speech in North Carolina Friday suggests he has no intention of leaving voluntarily.

Regardless, even if we do get a new name on the ticket, we are still looking at a tight race that comes down to a handful of swing states. Hence, the race still hinges on technicalities like campaign strategy, grassroots machinery and turnout.

These are unknowns, but they will become known. State- and county-level polls will come into focus. We will see which campaign gets more ads on TV in battleground areas and how effective their reach is. If there is a drop-in candidate, America will get to know him or her, and the party machineries will roll on, doing their thing. Society’s opinions of both current candidates—and both parties—are pretty hardened. But markets will get a bead on which side inspires more enthusiasm and, therefore, likely turnout.

True, markets don’t like rising uncertainty. But they love falling uncertainty, and that is what we will get as 2024’s second half unfolds. Not only will markets pre-price the presidential outcome, but they will see how Congress shakes out and how much power the presidential winner will have. Clarity will come on all fronts.

This isn’t unique to 2024—it happens every election year, which is why the vast majority are positive, with back-end loaded returns. As Exhibit 1 shows, year four has the second-best average return and second-highest frequency of positive returns of the four-year electoral cycle. And the good times come regardless of the winner’s party.

Exhibit 1: Presidential Term Anomaly


Source: Global Financial Data, Inc., as of 1/10/2024. S&P 500 total returns.

Now, most of the time, gains come late—as that uncertainty falls. But this year started off with relatively less uncertainty than usual, with two known candidates and a primary process that was little more than a formality. We suspect this is one reason for the unusually strong start for election-year returns. But given how much room there still is for uncertainty to fall from here, there should be plenty of gas left in the market’s tank.

And there is nothing about a good first half that points to weakness later. Quite the contrary. Election year first halves have posted 10% or greater gains eight times since 1928. The second half was also positive seven times.

As this year progresses, we will gain clarity on who is set to be the next president, how the next Congress looks and what the likelihood of big legislation is. As that gradually happens, the falling uncertainty should lift markets."
MY COMMENT

YES....we will get clarity and business will have no choice but to adjust and move on.....as usual.

I have no doubt which policies are best for business, the economy, and the country. But...I will not get into that here.

 

You may not like it.....but....welcome to the world of NORMAL mortgage rates.

AND.....NO these rates are NOT "stubbornly high". They are actually in the normal range for mortgage rates that most of us over age 40 have lived with all our lives. What is....highly ABNORMAL....is the rates in the high 2% to low 4% range that we saw recently. Those low rates were a once in a lifetime opportunity for home buyers and people that did.....or..... should have been.... refinancing.

https://www.foxbusiness.com/economy/mortgage-rates-july-3-2024

Mortgage rates climb to 6.95%
Mortgage rates up again, remaining stubbornly high amid housing affordability crisis

 

I dont own this stock.....TSLA.....and have no plans to own it in any of the accounts that I manage. But....this certainly has to rank as one of the big....turn-around....stories of the past 2-3 months.

Tesla short sellers lost $3.5 billion in two days of trading after deliveries report

https://www.cnbc.com/2024/07/04/tes...-billion-in-two-days-after-q2-deliveries.html

Key Content

• Tesla stock jumped this week, after a better-than-expected deliveries report for the second quarter.
• Short sellers, betting on a drop in the stock, got hammered.....BOOM.
• Investors will learn more about Tesla’s fundamentals, when earnings come out in the near future.

and

Tesla shares boomed by 73% after bottoming in April. The stock is now just $2 shy of wiping out its loss for the year.

I am a huge fan of ELON MUSK as a business person and driver of innovation I am very glad to see him having success lately. BUT....I still will not buy TSLA stock.

 

I am going to use....Lori....as an example in this post. She posted recently that she is going to focus on paying off some credit card debt over the near future and, for perhaps a year or so, would not be able to add to her account.

Her decision is well thought out in terms of the PROBABILITIES of what she is doing. What I like about her situation is that as a long term investor.....even though she will not be adding to her account for a while.....the account will still be chugging along on its own and probably making money for her.

That is the nice thing about having a long term focus. All of us have times when we do not add to our accounts. I actually only add to my account about once per year and sometimes not at all in a year. Yet......even though I am not adding to the account........ it continues to make money for me and GROW as the markets move up.

Adding money to an account is a nice goal for any investor. BUT....what is more important is to have long term focus......stay invested in stocks and funds.......and allow them to rack up gains by reinvesting dividends and capital gains and grow as the markets move up in their erratic and unpredictable fashion.

We all have times in our life when it is simply not possible to add money to savings......but if you are a long term investor.....your existing account will continue to compound and grow regardless. That is one of the super-powers of long term investing. Once you put that money to work....it is not dependent on "you" doing anything to continue to work. When your focus is elsewhere....your account will take care of itself......all to your benefit.

 

I like this little article.

Gen Z Is Taking Too Much Risk in the Markets
Even after being exposed to some financial education in schools, more young investors are putting speculative bets ahead of building long-term wealth.

https://www.bloomberg.com/opinion/articles/2024-07-03/gen-z-is-taking-too-much-risk-in-the-markets

(BOLD is my opinion OR what I consider important content)

"My financial education didn’t have the most auspicious start. I suppose I was lucky that in high school I had a class on basic investing and finance. But I cringe when I remember that we read One Up on Wall Street, which encouraged us to go to a local mall, look for stores that had a lot of customers, and consider buying their stock. Since then, financial education has become more common — but evidently not much better.

Access to financial education has never been greater, according to the CFA Institute, which polled Gen Z on their investing habits. The Gen Z cohort — those born between 1997 and 2012 — was almost 60% more likely to have some financial instruction in school compared with millennials, and 150% more likely than Gen Xers.

And yet, the survey reveals that Gen Z is making some terrible investment choices. They tend to be under-diversified and over-exposed to exotic assets. Their investment practices suggest that either they aren’t being taught what’s important or that whatever effort is being made in school is being drowned out by the lure of day-trading apps and advice from YouTube.

It is progress that more young people are in markets. The sooner individuals start investing, the more time they will have to grow their wealth and be able to fully participate in and benefit from the US economy. In addition to education, technology has made it easier to access markets with less money. Gen Zers have the highest rates of stock market participation at their age compared with early generations. In 2022 some 40% of under-25-year-olds are in the stock market in some form (including retirement accounts), compared with only 16% in 1995, according to the Federal Reserve’s Survey of Consumer Finances. But much of that growth comes from more speculation.

The chart below shows the share of under 25s who own individual stocks. After the bear markets in 2000 and 2008, young people held back on stock-picking. But once those bad markets were distant memories, new investors piled in.

The CFA survey found that one of the primary reasons young people say they invest is easy access to markets through trading platforms such as Robinhood that don’t require a minimum investment.

Another big factor is FOMO. And it shows. More than half of young investors in America own some form of crypto, making it the most popular asset in Gen Z portfolios. Indeed, an alarming 19% of Gen Z investors are only in crypto, instead of stocks or any other kind of marketable asset. About 41% own individual stocks, while only 35% buy mutual funds. It all adds up to a very risky, potentially volatile portfolio.

But who can blame Gen Z when you consider their lived experience? They have only seen the S&P 500 rise, led by a few large stocks that outpaced the rest. They also saw some of their peers get very rich from crypto and be treated like heroes for trading meme stocks. The lure of crypto trading was especially tempting when they were locked up during the pandemic with stimulus money to spend. We created a generation of speculators and gave them tools that offer a video-game buzz.

Education might not have been able to completely counter the thrill of day-trading stocks and speculating on currencies with no discernible value, but it could have helped people understand the role these assets should have in a portfolio. Buying single stocks (or any commodity or currency) is better understood as speculation because it’s a bet on a single company’s value rising or falling. Speculation is a zero-sum game where you are up against professional investors who have time, years of expertise and deep pockets. While it is tempting to root for the little guy, the pros usually win.

That doesn’t mean markets are rigged. Investing, or buying many stocks in the market, is a bet on the economy’s overall growth rather than on one stock going up or down. As the economy grows, everyone gains.

There is nothing wrong with speculation — in crypto, meme stocks or any other nontraditional asset. But it should be appreciated it for what it is, entertainment that occasionally pays off, like gambling in a casino. It shouldn’t be one’s primary investment strategy. Index funds aren’t exciting, but they’re often the best way to build a nest egg.

And it’s worth noting that most young investors report that they are putting their money into markets not for entertainment but so that they can have a comfortable retirement, according to the CFA survey.

Younger investors are still learning, and they have less money to lose. The median financial assets of under 25s in 2022 was $4,000, according to the Fed. But when the market turns, and odds are it will eventually because we are headed into a more volatile era, Gen Zers, under-diversified and heavy into crypto, are especially vulnerable to big losses. If the market turn happens relatively soon, they might shake it off and do better next time. But if the bull market goes on for longer, the losses will be larger and could set back homeownership and other financial rites of passage.

Either way, it isn’t ideal to rely on market downturns to teach each generation about the nature of market risk. Yet it isn’t clear what the alternative is, short of outlawing single-stock ownership for non-accredited investors. I am not ready to count out the power of education, even if it is clearly falling short right now. But that doesn’t mean it can’t be better and more effective. In a world where investing is more accessible and there are many compelling online videos full of bad advice, it has never been more important to get it right.

My Bloomberg Opinion colleague Matt Levine says the major shortcoming with financial education is that it teaches the wonders of compound interest but often fails to explain why some assets return more than others. In essence, it fails to educate us on what underlies financial markets — risk."

MY COMMENT

Add to the above comments on financial education the FACT that young people....especially men....tend to be more extreme risk takers than people that are older and more seasoned. Young investors that have little world experience have a hard time seeing the benefit of......."slow and steady wins the race".

Probably the BEST education is to have proactive parents that teach their kids how and why to invest. Parents that instill proper financial values in their kids. We all want the best for our kids and family.......and instilling good financial values is important.

 

Just throwing some things out there....RG. There is always QQQ as an alternative to the SP500....perhaps more risky....but still 100 GREAT companies.

BUT...it is hard to beat the SP500 for diversification, steady growth, and exposure to the greatest companies in the world.

As to individual stocks.....the only stock on my short list right now is WMT. Although I dont see myself buying any anytime soon.....since I will not be adding any money to my account.

 

After the last day and a half off....it is like we have a one day week today. Looks like the typical open lately.......moderate gains for the SP500, and a little better for the NASDAQ. Nothing crazy going on....so far.

Here is the economic news today....not that anyone cares.

June jobs report: US labor market adds 206,000 jobs, unemployment rate rises to 4.1%

https://finance.yahoo.com/news/june...-unemployment-rate-rises-to-41-112324134.html

(BOLD is my opinion ORR what I consider important content)

"The US labor market added more jobs than expected in June while the unemployment rate unexpectedly rose, reaching its highest level since November 2021, another sign that the job market continues to cool.

Data from the Bureau of Labor Statistics released Friday showed the US economy added 206,000 nonfarm payroll jobs in June, more than the 190,000 expected by economists.

The unemployment rate rose to 4.1%, up from 4% in the month prior and the highest reading in almost three years. June's job additions were a slight decline from May, which saw job gains revised down on Friday to 218,000 from the 272,000 initially reported last month. Total revisions for April and May showed the US economy added 111,000 fewer jobs than initially reported.

"The June jobs report showed more signs of cooling in the labor market, with job growth including revisions weaker than expected, the unemployment rate rising and earnings growth slowing," Oxford Economics lead US economist Nancy Vanden Houten wrote in a note to clients.

The S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) rose following the report, adding to gains after the market traded to record highs earlier this week amid a slew of softer-than-expected economic data, including readings on inflation that have the US pacing back toward a "disinflationary path," according to Federal Reserve Chair Jerome Powell.

Ahead of Friday's jobs report, investors were pricing in two interest rate cuts this year, with the first most likely to come in September.

According to the CME FedWatch Tool, investors are pricing in a nearly 75% chance the Fed cuts rates in September. Last month, Fed forecasts suggested one rate cut would likely be appropriate this year.

To some, Friday's report further strengthens the case for Federal Reserve interest rate cuts in the near future.

"Today's employment report ought to firm up expectations of a September rate cut," Renaissance Macro's head of economics Neil Dutta wrote in a note to clients. "Economic conditions are cooling and that makes the trade-offs different for the Fed ... Powell should use July to set up a September cut."

With unemployment claims rising and the unemployment rate at its highest level in more than two years while inflation is falling, economists believe the Fed is walking an increasingly fine line by keeping interest rates at their highest levels in more than two decades.

"Given the cooling evident over the past year in the labor market, we see further labor market weakening as becoming more worrisome and less welcomed by the Fed," Wells Fargo senior economist Sarah House wrote in a note to clients on Tuesday.

Data out earlier this week also showed signs of a slowdown in the labor market.

On Wednesday, the ADP Research Institute's National Employment Report showed 150,000 jobs were added to the private sector in June, a deceleration from the 157,000 job additions in May.

Meanwhile, data from the Department of Labor showed nearly 1.86 million continuing unemployment claims were filed in the week ending June 29, up from 1.83 million the week prior. This marked the ninth straight week where continuing claims have risen.

Elsewhere in Friday's report, wage growth, an important measure for gauging inflation pressures, slowed to 3.9% year over year. On a monthly basis, wages increased 0.3%, a decrease from the previous month's 0.4% gain.

Meanwhile, the labor force participation rate picked up to 62.6% from 62.5% the month prior.

The largest job increases in Friday's report were in government employment, which added 70,000 jobs in June. At the same time, healthcare employment added 49,000 jobs, lower than the average monthly gain of 64,000 over the last twelve months.

MY COMMENT

GOVERNMENT, government, government, continues to be where the jobs are being added....it never stops growing or pulls back....it is relentless. It is also using.....YOUR MONEY....since it has no money of its own.

The data we see in this type of report is like......trying to evaluate how many angels can dance on the head of a pin. Who cares....and....is it even real....206,000 jobs versus 190,000 expected....is meaningless. Especially when you consider that for April and May......111,000.....fewer jobs were added than INITIALLY REPORTED. This data is so flawed as to be useless with this sort of revisions taking place.

 

These rates jump around like CRAZY....but....good news for the moment.

Treasury Yields Slide as Jobs Renew Fed-Cut Hopes: Markets Wrap

https://finance.yahoo.com/news/asian-equities-tread-water-us-221926837.html

the Ten year Treasury right now......4.299%.

 

Lets hope so.......although this is not so big or unusual as it seems......since.....the long term average gain in the SP500 is about 10% to 11% per year which translates to a 100% gain in 6-7 years using the rule of 72's.

Why the S&P 500 is poised to rocket 100% in 5 years

https://finance.yahoo.com/news/why-the-sp-500-is-poised-to-rocket-100-in-5-years-130007834.html

(BOLD is my opinion OR what I consider important content)

"The bull run in stocks may have further room for a stampede.

"We are in the early innings of a bull market where the earnings recovery story has barely begun," Bradesco BBI's head of equity strategy Ben Laidler told Yahoo Finance Executive Editor Brian Sozzi on the Opening Bid podcast (video above; listen in here).

Laidler, whose résumé includes stints at HSBC and JPMorgan, thinks there's a likelihood of two interest rate cuts this year from the Fed — which should fuel further investor excitement beyond expected strong earnings growth.

Those factors could help lift stocks at least 100% over five years, Laidler contended.

"Earnings might easily compound at 15% a year if the economy keeps chugging along and you get a little bit of multiple expansion, which I think lower interest rates would justify,” he said.

The current bull market for stocks is seen as starting in October 2022, when the S&P 500 (^GSPC) reached its most recent low. Since then, the index has gained a sizzling 55%.

The gains have been powered by enthusiasm around AI, which has driven names such as Nvidia (NVDA) and Apple (AAPL) to record highs.

This year, the momentum has carried the Dow Jones Industrial Average (^DJI) beyond 40,000 and the S&P 500 beyond 5,000.

The S&P 500 has managed to tack on a 15.3% increase in the first half of 2024. This is the 16th strongest start to a year since 1950, according to data from Truist chief markets strategist Keith Lerner. The S&P 500 has now risen in seven of the past eight months.

Part of Laidler's thesis will be put to the test this coming earnings season, which begins with results from banks such as JPMorgan (JPM) and Wells Fargo (WFC).

FactSet pegs second quarter earnings growth for S&P 500 companies at 8.8%. If achieved, it will mark the highest year-over-year growth rate since the first quarter of 2022. It will also represent the fourth consecutive quarter of year-over-year earnings growth for the index.

Double-digit-percentage earnings growth is expected in the Communications Services (18.5%) and Information Technology (16.1%) sectors.

“We are in a very fundamentally supported market. Earnings are recovering, and rate cuts are coming,” added Laidler.

The outlook for AI stocks still looks strong despite big-time gains, Goldman Sachs portfolio manager Brook Dane said ..."

MY COMMENT

I dont see the above as......WILD OR CRAZY. Personally if we get a little luck in terms of world events.....I do believe this BULL MARKET can run for another 1.5 to 3 years.

Of course there will be corrections and perhaps even bear time periods happening along the way.

We still have rate cuts to look forward to and when they happen there is good potential for strong market reaction to the positive side.

Of course......as usual.....right or wrong..... I will continue to be fully invested for the long term as usual. Time will cure all market ills for the patient and prudent investor.